PM May seeks to ease Japan's Brexit fears during trade visit

LONDON/TOKYO (Reuters) - British Prime Minister Theresa May will look to ease corporate Japan’s worries about Brexit during a three-day visit to the country from Wednesday focused on progress on a bilateral trade deal for when Britain leaves the European Union.

May’s first trip to Japan as prime minister comes at a difficult moment, with Japanese attention focused on North Korea’s Tuesday missile test and Britain’s Brexit negotiators recently on the receiving end of sharp criticism from EU officials.

May will lead a 15-strong business delegation, including Standard Life Investment (SLA.L) chief executive Keith Skeoch, and carmaker Aston Martin’s CEO Andy Palmer, pitching Britain and Japan as the “perfect partners for the future”.

She will meet Japanese Prime Minister Shinzo Abe in Kyoto before traveling to Tokyo for an investment conference and banquet. May and Abe are due to speak publicly on Thursday following one-to-one talks.

“My discussions with Prime Minister Abe will focus on how we can prepare the ground for an ambitious free trade agreement after Brexit, based on the EU-Japan agreement which I very much hope is nearing conclusion,” May said in a statement ahead of her departure.

May will also discuss defense cooperation, describing Japan as “our closest security partner in Asia”. She will become the first European leader to attend a meeting of Japan’s National Security Council and will also visit its flagship helicopter carrier ‘Izumo’ for a briefing with military officials.

North Korea fired a ballistic missile over Japan’s northern Hokkaido island into the sea early on Tuesday, prompting warnings to residents to take cover and drawing a sharp reaction from Abe. May also strongly condemned the launch.

Japan’s foreign ministry said the two leaders are expected to agree on the importance of China’s role in ramping up pressure on North Korea.

BREXIT EFFECT

Japan has been unusually outspoken about its concerns that Britain’s departure from the EU, which was decided by a public vote in 2016, could affect current and future Japanese investments in Britain.

Britain is the second most important destination for Japanese investment after the United States, with firms like Nissan (7201.T), Toyota (7203.T) and Hitachi (6501.T) investing billions in carmaking, energy and transport.

During a visit to London by Abe in April, Britain said that Japanese companies had already invested over 40 billion pounds ($52 billion) in the British economy.

But Japan is also an important destination for British investment. Aston Martin said on Tuesday it will open an advanced product planning office next year in Japan to better understand the needs of Asian buyers and tap into new technologies.

The firm is hoping to boost demand from Japan and the United States partly as a way to mitigate against any risks from Brexit which could add costs and delays to the 15 percent of cars it currently sells into the European Union.

Speaking ahead of May’s visit, Japanese Deputy Chief Cabinet Secretary Yasutoshi Nishimura said Tokyo had to react to “a sense of crisis among businesses” over Brexit, and gather information about the British negotiating strategy.

Britain has published a series of papers setting out how it wants to settle its divorce with the EU, and is pushing for talks to move on to discuss the future relationship between the two - something of critical importance to investors.

But European Commission President Jean-Claude Juncker insisted on Tuesday that the new relationship could not be discussed until initial differences had been resolved, and the EU’s chief negotiator Michel Barnier said on Monday he was concerned at the slow progress made so far.

Japan’s foreign ministry said Abe is expected to ask May to maintain transparency and predictability regarding Brexit so that any impact on corporate activity will be minimized - echoing concerns Abe expressed in April about a Brexit cliff-edge.

May’s spokeswoman said the prime minister would reiterate Britain’s position that it is seeking to agree a time-limited Brexit transition period after March 2019 to avoid a sudden change in trading and regulatory conditions for businesses.

“What they will discuss in private I can’t pre-empt, but that is our position and she’ll be setting that out if he (Abe) asks,” the spokeswoman said.